Honeywell’s CEO Sees Sales Growth Accelerating as Pandemic Recedes

(Bloomberg) -- Honeywell International Inc. will accelerate sales growth as it creates new products for the renewable-energy industry, air taxis and industrial software, Chief Executive Officer Darius Adamczyk said.

Honeywell set a goal of annual organic sales growth of 4% to 7%, up from its previous goal of 3% to 5%. Margins will expand at an annual pace of 40 to 60 basis points, higher than a previous goal of 30 to 50 basis points.

“We've put in the hard work to transform the enterprise, to spend time on innovation, to develop breakthroughs,” said Adamczyk, who took over as CEO in 2017, during a presentation Thursday to investors at the company headquarters in Charlotte, North Carolina. “The best days are very much still ahead.”

The pandemic hit Honeywell hard as demand for aerospace parts and energy services plummeted. The company cut costs, reduced working capital and cleaned up a “mess” at its supply chain, providing a benefit of $2 billion since 2018, Adamczyk said. The company will squeeze out another $2 billion with these initiatives over the next three years, he said.

The company will deploy $25 billion of cash through share repurchases, dividends and acquisitions over three years. Honeywell committed to repurchase $4 billion of shares in 2022. Acquisitions aren't the main focus for boosting growth, Adamczyk said.

“M&A grabs the headlines, but it doesn't necessarily give you the best financial returns,” he said. “Investing in yourself and innovation is generally the best returns you can get.”

Renewable energy is one of those examples, Adamczyk said, with Honeywell creating new technologies for recycling plastics, capturing carbon, producing sustainable aviation fuel and researching hydrogen solutions. That renewable-energy business will be the fastest growing unit at Honeywell with sales expected to jump to $700 million in 2024 from $200 million last year.

The company now expects revenue from new products to account for a third of revenue in 2023, up from 21% in 2017. This revenue will come both from “breakthrough initiative” and market-share gains, wrote Sheila Kahyaoglu, an analyst with Jefferies, in a note Thursday.

“Honeywell continues to focus on leveraging key areas such as the supply chain, automation and technology across the portfolio,” Kahyaoglu said.

Shares rose 1.8% to $189.78 at 1:20 p.m. in New York trading.